Josh Hamilton Plays $29M Above His Measly $3.25M Salary

Last week we took a look at on-the-field profitability in Major League Baseball and what it takes to be a successful team. In short, there appears to be two paths to greatness: 1) Spend a ton of money on player salaries and just hope the team doesn't underachieve (e.g. Yankees, Phillies); 2) Spend $70-100 million on payroll and hope your players play beyond their payscale (e.g. Rays, Reds).

The first way is simple in the theory but not always easy to execute. The second method, on the other hand, can be very effective, but it is not always east to identify how to implement. The key is to find cheap talent that plays more like great high-priced free agents.

Let's take a look at the biggest bargains in baseball this season...

What we see is that while Josh Hamilton is the best player in baseball (based on WAR*), he was only the se ond biggest bargain, behind Joey Votto. Still, playing $29.0 million above Hamilton's salary ($3.3M) is the biggest reason the Texas Rangers were able to qualify for the playoffs despite an opening day payroll of only $55.3 million.

As we look at the list as a whole, a couple of things stick out...

Seven of the 20 biggest bargains made less than $1.0 million in 2010. And only two made more than $5.0 million.

Of the 20 biggest bargains in baseball, only five (25%) are pitchers despite making up nearly half of most rosters. While teams will always need good pitching to be successful, this shows that teams are more likely to find value with position players. It is the overachieving hitters that will turn a $70 million payroll into a 95-win team.

The three biggest bargains in baseball this season (Josh Hamilton, Joey Votto, Evan Longoria) were the key contributors to low- or mid-payroll playoff teams.

While the debate over the American League Cy Young Award has centered around CC Sabathia, Felix Hernandez and David Price, these numbers suggest Francisco Liriano should probably also be part of the discussion.

Spending big money on big free agents can certainly make a team successful if they spend wisely. But if a team doesn't have the resources of the Yankees or Phillies, the only way they are going to be successful is if they can identify cheap, young position players like Hamilton and Longoria.

*Wins Above Replacement (WAR) is a way to calculate how many wins a player is worth to their team. WAR is nice because it allows us to compare all players (pitchers and hitters) on one scale and it includes all aspects of a player's abilities (hitting, pitching, fielding). It is not perfect. For example, catchers are undervalued because it is still difficult to measure a catcher's defensive abilities. These wins can then be translated into a dollar value (~$4M per win).